1099R Roth Conversion Issue

[Splash]

On December 26, 2017, my first Roth conversion was completed within my 401k plan. I didn’t get a 1099. Since mid-February, I have had several conversations with the Plan Administrator. Each time, I was told a re-print was being mailed. Today I was told that I will not get a 1099 for this transaction until 2019 because the plan used December 22 as the cut off for 2017 tax reporting. As a result, this transaction will be included in my 1099 for Tax Year 2018.

Reporting the conversion in 2018 instead of 2017 will delay starting my Roth clock by 1 year and reduce the amount I can convert in 2018. I’m thinking about including this Roth conversion in my 2017 Tax Return even though I don’t have a 1099. However, I am concerned about my 1099s not matching my returns for 2017 and 2018.

I would appreciate your thoughts.

 

[bingybear]

I've done my Roth conversions from TIRAs, not 401ks. What dates to the 401k state the distribution happened? The dates you requested transfers likely have little meaning.


I would expect that having your 1099's not match your taxes would likely get some questions from the IRS.

 

[gauss]

I had a somewhat similar problem in December 2017 with an IRA (not a 401k).

I mailed Vanguard the paperwork for a Roth conversion the first/second week in December. They received it the third week but did not execute it. On the Dec 29 or so I called them to inquire what the heck the problem was.

I submitted everything in good order and their system silently sidelined it. It took a couple of days but they eventually processed it with an effective backdate date to they date they received the request.

I was trying to coordinate a large (mid 5-figure) Charitable contribution with an offsetting large Roth conversion.

If your company clearly states in writing the deadlines, then you may not have a leg to stand on, but lacking this, you may be able to get a backdate for the transaction.

I would read your plan documents to see how transactions are suppose to be processed.

Will you be under 59 1/2 when you were planning to take your first distribution--assuming you met the original 5 year rule?

If over 59 1/2 you may get a Code 7 "Normal Distribution" and the 10% penalties might not apply even if you didn't satisfy the 5 year holding period.

-gauss

 

[GrayHare]

On December 26, 2017, my first Roth conversion was completed within my 401k plan.

IMO that's the key. If you have a document from the plan showing that 2017 date, such as an account statement, that would probably be enough to satisfy the IRS should they ever question it.

 

[pb4uski]

+1 if the transactions show up on the OP's 2017 401k and Roth account statements then I would go ahead and report on 2017 tax return and use the statements as support.

Secondly, I don't believe that the 401k administrator has the right to select a 1099 cutoff date other than December 31.... they may be subject to penalties for not properly reporting.

 

[zinger1457]

I would also try and move the discussion with the plan administrator up the chain and try and get someone that can make things happen. You might be able to do the conversion for 2017 based on the date of withdrawal as discussed above but it could turn into a headache and more work for you not having the 1099's match. Seems to me like they made a mistake or were slow in processing the request.

Sounds like you haven't done your 2017 taxes yet or you are planning on modifying your already submitted 2017 returns. If the taxes already paid for 2017 don't include the taxes due for the Roth conversion you will probably also have to pay interest on the additional tax amount due.

 

[Splash]

Op here.

Thank you everyone for your thoughts.

I have an email confirmation that the Roth conversion was completed on December 26, is taxable, and a 1099 will be sent (doesn’t say when or for which tax year). Also, my quarterly statement includes the conversion transaction completed in December and shows the Roth 401k account as part of the December 31 balance.

I would read your plan documents to see how transactions are suppose to be processed.

Unfortunately, the Plan Document that is available via the Plan Administrator’s web site is dated January 1, 2016. The document is silent regarding Roth conversions as they were not an option until September, 2017. However, I could not find any reference to tax year cut off or transaction timing for other distributions or contributions.

Will you be under 59 1/2 when you were planning to take your first distribution--assuming you met the original 5 year rule?

If over 59 1/2 you may get a Code 7 "Normal Distribution" and the 10% penalties might not apply even if you didn't satisfy the 5 year holding period.

We should be able to avoid taking a distribution from my Roth until after 59½ and 5 years. However, I have been striving for maximum flexibility. In 2017, we did a Roth conversion from DH IRA to get his 5-year clock started. We also contributed to a new ROTH IRA in my name to start that clock in case we choose to rollover my 401k at some point.

DH and I retired in 2017 at 55 with 75% of investments being tax deferred with a big chunk of that being in my 401k. We want to do as much Roth conversions as possible yet stay in the 12% bracket and avoid the ACA Cliff. However, I haven’t yet figured out the optimum split to convert each year between my 401k and DH IRA. If we don't recognize my Roth conversion until 2018, we will probably convert more from DH IRA to compensate for this 1 year delay.

 

[Alan]

You could file a substitute 1099-R, I have to file 2 each year for my 2 UK pensions. The substitute form is actually designed for US companies who have not provided a timely 1099. When you complete the substitute 1099-R the accompanying form asks why you are filing a substitute, and also what steps you have taken to get a 1099-R.

You can supply the company name, why they have not provided a timely 1099 and how you have arrived at the figures on your substitute form.

 

[Splash]

Alan,

I think filing a substitute 1099R is a really good solution. Thank you.

 

[Alan]

Alan,

I think filing a substitute 1099R is a really good solution. Thank you.

I use TurboTax but I expect all the tax prep software will lead you through the substitute form process.

 

[omni550]

I use TurboTax but I expect all the tax prep software will lead you through the substitute form process.

Dunno.

FWIW, I used H&R Block software to prepare my taxes this year. What a terrible experience compared to the years I had used Turbo Tax. It didn't even instruct me to generate (nor did it produce them 'auto-magically') the quarterly vouchers I need to pay my 2018 estimated tax payments.
Never again.

omni

 

[bberris]

Dunno.

FWIW, I used H&R Block software to prepare my taxes this year. What a terrible experience compared to the years I had used Turbo Tax. It didn't even instruct me to generate (nor did it produce them 'auto-magically') the quarterly vouchers I need to pay my 2018 estimated tax payments.
Never again.

omni

I liked HR blocks ability to report all covered transactions as a summary on schedule D instead of individually as taxact did. It's not that hard to make estimated payments.